Identity theft has become a growing epidemic in the United States and in the rest of the world. Many people have become victim to identity theft which resulted in the loss of money, time, credit and privacy. The incidence of identity theft increased 20% in 2001-2002 and 80% in 2002. Identity theft costs individuals and businesses billions of dollars each year. Yet there is no method or system to stop it.
Nearly 85% of all victims find out about their identity theft case in a negative manner. Only 15% of victims find out due to a proactive action taken by a business. The average time spent by victims is about 600 hours, an increase of more than 300% over previous studies. And it is taking far longer to eliminate negative information from credit reports. The emotional impact of identity theft has been found to parallel that of victims of violent crime.
In 2003, the Federal Trade Commission (FTC) found that over twenty-seven million Americans had been victims of identity theft in the previous five year, including approximately ten million people, or 4.6% of the population, in 2002.
In 2002, over three million consumers or 1.5% of the population discovered that new accounts had been opened, and other frauds such as renting an apartment or home, obtaining medical care or employment, had been committed in their name. Over six million had experienced their existing accounts compromised by an identity theft. A staggering ten million individuals were victims of identity theft.
Fifty-two percent of all ID theft victims, approximately 5 million people in the last year, discovered that they were victims of identity theft by monitoring their accounts.
In 2002, identity theft losses to businesses and financial institutions totaled over forty-seven billion dollars and consumer victims reported five billion dollars in out-of-pocket expenses. In those cases, the loss to businesses and financial institutions was $10,200 per victim totaling $32.9 billion. Individual victims lost an average of $1,180 for a total of $3.8 billion.
Where the thieves solely used a victim's established accounts, the loss to businesses was $2,100 per victim totaling $14.0 billion. For all forms of identity theft, the loss to business was $4,800 and the loss to consumers was $500, on average.
The major concern of identity theft is the ease with which it occurs. Typically, identity thieves obtain the Social Security number and name of an individual. That's often all that is needed for identity theft. In addition, they also might obtain credit card numbers and hijack existing accounts. Other pieces of information useful to identity thieves are dates of birth, mother's maiden name, and driver's license number.
Many of these pieces of information can be obtained by simply stealing a person's wallet or going through a person's garbage. In addition, many identity thieves are going through the Internet and obtaining the information needed to obtain a person's identity. Many internet sites require registration which includes personal information.
Furthermore, these companies and organizations collect the information and store the information in a database that could be sold or traded to other entities. As time goes on, a person's personal information could be obtained by hundreds of businesses and entities. A hacker or disgruntled employee may at any point obtain that information for the purpose of identity theft.
In addition to online identity theft, the use of credit cards at merchant stores is another avenue of identity theft. In providing credit card information, the credit card holder also provides the name, billing address, and other information an identity thief can use to assume someone's identity.
There are many forms of identify theft, the most common form of identity theft is financial identity theft. This is when someone obtains the Social Security number (SSN) and perhaps a few other pieces of information about an individual, and uses that information to impersonate them and obtain credit in their name. The imposter might apply for credit, rent an apartment, get phone service, buy a car—and then not pay the bills, giving the victim a bad credit rating. Victims must then spend months and typically years regaining their financial health.
Another form of identity theft is criminal identity theft. Here, the imposter in this crime provides the victim's information instead of his or her own when stopped by law enforcement. Eventually when the warrant for arrest is issued it is in the name of the person issued the citation—yours.
Yet another form of identity theft is identity cloning. In this crime the imposter uses the victim's information to establish a new life. They work and live as you. Examples: Illegal aliens, criminals avoiding warrants, people hiding from abusive situations or becoming a “new person” to leave behind a poor financial history.
Finally, there is business or commercial identity theft. Businesses are also victims of identity theft. Typically the perpetrator gets credit cards or checking accounts in the name of the business. The business finds out when unhappy suppliers send collection notices or their business rating score is affected.
Currently, there exists no efficient process to eliminate identity theft from occurring. In fact, there exists very few and limited laws to protect consumers from identity theft. From a legislative perspective, one of the main problems is that no federal law governs—or even limits—the use or disclosure of someone's SSN among private entities. This leaves private companies free to deny anyone credit, service or membership for refusing to furnish a SSN. Simultaneously, and contrary to popular belief, the Social Security Administration has no power to control how private entities use their account numbers.
The result is an extremely vulnerable system that puts the entire burden of protection on the consumer. With no power to control how their SSN is kept, used or distributed, many are left simply to sit and wait for an ID thief to strike.
Unfortunately, there is a gaping hole under existing law for preventing ID theft schemes. Although fraudulently using an individual's identity information is a crime, the after-the-fact approach currently in place does little to protect consumers from identity theft before it occurs.
Current identity theft “solutions” offer help to consumers after the crime has occurred. Businesses—typically credit agencies—offer identity theft insurance which include monetary reimbursement for financial losses, time lost, and attorney's fees. These businesses and entities also offer legal assistance or guidelines for the consumer in obtaining his or her identity back and to stop the use of their identity by others. There are no businesses or entities that offer services to individuals to help protect them from identity theft before it occurs.
Further, an individual voluntarily gives out their personal data in the course of the day: from registering internet domains to obtaining credit to purchasing items over the internet, in person, or by phone. To function in society, one must provide this information.
Once a person's personal information is out there, there is no getting it back. Many companies share information and data and, as a result, we are continually bombarded by spam, mail solicitations, numerous marketing calls and all other unwanted contacts by organizations simply because, at some point, we wanted to buy something!
In short, it would be an advancement in the art of privacy protection to provide methods and systems which would greatly reduce the act of identity theft as well as other forms of annoyances caused by the release of a person's personal information, while maintaining the confidentiality and security of the individual. More specifically, to control a person's identity while using the internet, credit card, or in any transaction in which a person's identity might be obtained.